All posts tagged Greek bonds

More banks were beginning to offer prices on the new Greek government bonds after the country’s successful debt swap, but the levels currently quoted by traders point to continued concern about Greece’s financial future.

Initial quotes in the “when-issued” market for the new Greek 2042 government step-up bond range between 17% and 22% of face value, according to traders with knowledge of the matter. Small-sized trades are going through the broker market as dealers “test the water,” according to one trader.

“We are quoting the new 2042 bond between 20 and 22 cents to a euro…t here is some interest to trade these securities but volume is still quite small,” said a London-based market maker.

The new Greek bonds will settle Monday and some participants expect actual trading to commence Tuesday.

The new Greek government bonds will have a range of maturities between 11- and 30-years, with step-up coupons. These coupons range from 2% up to 2015, 3% from 2016 to 2020, 3.65% in 2021 and 4.3% between 2022 and 2042.

Under terms of the bond swap announced by the Greek government early Friday, there was an average 83.5% participation rate on a total of EUR206 billion in Greek bonds held by private investors. Under the deal, investors will waive off 53.5% of their principal and get new Greek bonds with lower coupons and longer maturities. Greece needed to get as high as a participation rate as possible to shave off its mountainous debt pile and get its debt on a more sustainable footing.

Some investors have snapped up Greek bonds governed by foreign laws in recent weeks in a bid to get a better deal from a Greek debt restructuring but market participants are playing down the significance of the move, saying that its impact on the overall deal will be limited.

These investors are hoping that by amassing bonds governed by foreign laws, they can block provisions that would bind all bondholders to take steep losses on their holdings and instead get a sweeter deal from Greece as the country tries to avoid a long drawn-out legal process. But some strategists warn the tactic is fraught with risks.

“I think hedge funds trying to hold out on foreign-law bonds are playing a very risky game as they are dealing with a counterparty that is basically bankrupt. As such, it is not just a case of willingness but also the ability of the Greeks to repay,” said Pavan Wadhwa, head of European rates strategy at JPMorgan in London.